US slowdown threatens UK recovery hope
THE economic slowdown in the United States was even sharper than in the United Kingdom at the start of the year – sparking fresh fears for the global outlook.
Official figures in Washington showed American output rose by just over 0.1pc in the first quarter of the year as storm clouds gathered around the world.
That was far slower than the 0.4pc growth rate seen in Britain and undermined claims that the UK is suffering because of the looming referendum on membership of the European Union.
George Osborne was this week accused of talking down the economy after he warned that the threat of Brexit ‘is weighing on our economy’.
His claims were immediately undermined by experts who said economies around the world have slowed in recent months amid turmoil on financial markets and worries about China and other emerging nations.
Jonathan Loynes, chief economist at Capital Economics, said: ‘The slowdown in the US would seem to suggest pretty strongly that it is a global phenomenon.
‘It’s certainly our feeling that the UK slowdown is due to factors other than Brexit concerns.’ Howard Archer, chief UK economist at research group IHS Global Insight, said: ‘You certainly cannot pin all of the UK slow-downdown to uncertainties over the EU referendum.
‘Clearly global economic uncertainties have had an impact as well as the financial market turmoil earlier in the year.’
Gross domestic product in the US – the world’s biggest economy – rose at an annual rate of 0.5pc in the first quarter of the year as consumer spending growth slowed, business investment plunged and exports declined.
It followed annual growth of 1.4pc in the final three months of 2015. The slowdown in the US fuelled speculation that the Federal Reserve will not raise rates again until the end of this year.
An annual rate of growth of 0.5pc is the equivalent of quarterly growth of 0.125pc on the measure favoured in Europe – putting the US well behind the UK in recent months.
Britain’s economy grew by 0.6pc in the final three months of last year before the rate of expansion slowed to 0.4pc in the first quarter of this year.
Chris Williamson, chief economist at Markit, said: ‘The UK is an open economy so it is heavily influenced by the global environment. We estimate that the global economy grew at its weakest rate for just over three years in the first quarter, which clearly hit our exports.’
The economy is once again likely to be a key battleground in the US presidential elections later this year with the Democrat and Republican frontrunners – Hilary Clinton and Donald Trump respectively – offering widly different policies.
While Clinton has promised more spending, higher taxes and more regulations, Trump has promised less spending, lower taxes and fewer regulations.
But there are concerns over whether their policies add up as well as the anti-free trade tone of the debate.